June 24, 2019

What Libra Means for Your Business

The unveiling of Facebook’s cryptocurrency, Libra, stands tall in a line of landmark moments in the tech industry. But what does Libra mean for your business, and why is it important? What are the opportunities and risks, and how should we respond?

Blockchain’s Arrival on Main Street

For the first time, a group of well-respected businesses (including nonprofits) are creating a cryptocurrency together. Libra will not just be Facebook’s coin to use in WhatsApp, Instagram DMs, and Messenger, it will also be the coin used by Visa, Mastercard, PayPal, Spotify, Uber, Lyft and other big names who will join a list expected to eventually include 1000 or more businesses and organizations.

They are doing this because they believe the digital transfer of value in a direct peer-to-peer and trustless way is transformative in nature. Sending money to a friend or a business will become as frictionless, costless and instantaneous as sending them a picture.

While digitalizing photography made the process of capturing a moment on an image easier, it also created an explosion in the number of pictures we collectively create and store, many in an automated way. A very similar trend can be expected for digital money. More (automated) direct and continuous value exchanges ( B-to-B, B-to-C and C-to-C) will unfold.

Introducing Web 3.0

With the onset of digital photography and video, new business models were created, including Snap, Instagram, YouTube, Facebook and others, collectively often referred to as Web 2.0. Libra is not just an alternative to PayPal, it offers the promise of a foundation for a new open-source financial network.

New business models will be built on top of Libra using Move’s smart contract language. We expect massive experimentation to happen in lending, fundraising and investing, followed by new business models created in the consumer, tech, entertainment, education, professional services and healthcare industries.

For this reason, the onset of blockchain and cryptocurrencies is commonly referred to as the foundational building blocks for the “internet of money” or simply “Web 3.0.” The Ethereum network has been the underlying network of preference for many innovation projects in past years. Having a stable and credible framework, backed by highly reputable businesses, will usher in a new era of innovative new business models.

Opening of New and Existing Markets

People in underdeveloped countries around the world who previously did not have access to banking systems (the 1.7 billion unbanked) were deprived of some of the basic building blocks of economic development: a stable currency, the ability to take out a loan, the ability to safely store value, and the ability to account for anything in a transparent and reliable way.

Through a smartphone and a handful of apps, these foundational blocks can be airdropped on over a billion people. This will spur development, creating new markets and ultimately lifting many people out of poverty.

For first-world markets the widespread deployment and usage of a cryptocurrency will force regulators to remove any remaining uncertainty on legal, tax, audit and accounting rules and guidelines. Countries and consumers benefit from creating transparent and easily navigable frameworks. The U.S. regulatory bodies have been moving down this path already and Libra’s oncoming will accelerate this development.

New Security & Risk Management

Digital money and digital assets benefit from open and transparent ledgers and records. We don’t have to rely on a third party to execute or review a transaction, we can verify this ourselves.

Where assets are not digitally captured, we do need the help of an auditor to provide this trust enabling function. Where they are digitally captured is where you will want a trust aggregator to show you things are processed as expected, and more importantly, not as expected.

Security and risk monitoring become more necessary in a world where value is exchanged directly and instantly. Not through backward-looking periodic reports, but instead, in real time – independently verified and easily accessible, all through the transparency and reliability of blockchain technology.

How
to Start

The most glaring opportunity is to begin the process of future-proofing your business to transact in this digital asset world. Setting up your business to transact with cryptocurrencies is in many ways like installing a dial-up internet modem in 1992. The impact was marginal at the time, and yet it is hard to overstate the importance of doing so decades later.

Digital assets require different payment processes, accounting treatment, tax treatment, custody solutions and controls in place. Early digital asset adopters will have an opportunity to gain momentum versus their competitors and capture a disproportionate share of the digital value exchanging hands.

Ready for the next step? Learn more about Armanino’s best-of-breed cryptocurrency readiness solution that combines ease of use with risk mitigation.

Andries leads the Blockchain practice and brings a passion for growth to his clients. He works with a variety of crypto and blockchain projects and exchanges, helping them navigate accounting, audit, tax and risk best practices as they grow. He also helps non-crypto industry clients transform their business through blockchain technology enablement.

Prior to joining Armanino, Andries was CEO at The Brenner Group, a boutique Silicon Valley financial services firm. Before that, he was a partner at Moore Stephens Belgium. He started his career at PricewaterhouseCoopers. He grew up in Belgium, and lived and worked in New York and Shanghai before moving to California.

Co Authors :

Clayton is a Senior Consultant in Armanino’s Blockchain practice, with over 7 years of controls, analytics, and blockchain experience. He specializes in on-ramping clients to accept crypto as payment and development of business blockchain solutions. He has also worked on regulatory public company crypto projects and stablecoin attest engagements.

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